If I’d invested £1k in NIO stock at the start of 2022, here’s how much I’d have now

Last year will be remembered as one when the market experienced great volatility. But for a long time the investor NIO (NYSE: NIO ), which is probably nothing out of the ordinary.

That’s because it’s been one hell of a ride since the Chinese electric vehicle (EV) manufacturer hit the public market in 2018. In fact, the much-used roller coaster metaphor is apt.

That’s because the five-year NIO stock chart looks like an amusement park attraction, with white ramps and dizzying drops.

So what if I invest £1,000 in a so-called ‘Tesla from China’ in early 2022?

Big dipper

Last month, NIO could be sold for 30 US Dollars. They started this month at $11. This means that the stock is down about 66% in 2022.

So if I made an investment of £1,000 at the start of 2022, I would have around £340 today. I’ll be down £660 or so. That’s assuming I don’t pay a commission to buy shares. If I do, then obviously I will go down a bit more.

That is clearly not good. And because the company invests all of its earnings (and some) back into operations to fuel growth, it pays no dividends. I will be left with a huge capital loss, as it is now.

Why is this happening?

Gale-force headwind

Unraveling exactly why stocks are falling is sometimes a difficult task. But in the case of NIO Shares, it seems very likely that two big things are against them.

The first and most obvious is that the market has turned against growth companies that are not profitable. That certainly applies to NIO, as it reported a net loss of $582m in the third quarter of 2022. And the company does not expect to generate consistent profits.

The second factor weighing on NIO stock is China’s economic woes. The government’s key ‘zero-Covid’ policy (now abandoned) continues to disrupt normal economic activity.

In November, retail sales in China fell 5.9% year-on-year. This suggests that many Chinese consumers are currently struggling financially, so they are unlikely to splash out on one of NIO’s luxury EVs.

On top of this, government subsidies for EV buyers in China expired at the end of last year.

Should I buy the stock?

Despite the headwinds, NIO recently announced that it had delivered 15,815 vehicles in December. That’s a 50% year-on-year increase and a monthly record.

For the fourth quarter (end of December 2022), it delivered 40,052 EVs. That’s a 60% increase and a monthly record. For the total of 2022, NIO delivered 122,486 vehicles, an increase of 34% compared to 2021.

Even with the ongoing Covid crisis, China will still account for more than half of all EVs sold globally in 2022. I think this shows how strong the EV trend is today. It is unstoppable and will last for decades.

So, would I buy it? No, not enough.

I left NIO stock on my watch list, as I am interested in the growth story here. But until the company starts posting profits, I think investors’ interest in the stock will remain muted.